Focus Five: 5 Things to Know about the Tax Code

This week, Erik & Randal break down the five more important things you should know about the new tax code. A lot of what they cover this week came from National Association of Realtor's statement on the new tax reform. The reason Focus Real Estate believes in paying to be a Realtor is that they actively work in Washinton to preserve homeowner's investments. But homeowners and renters alike, this will be handy come tax time!

Leave it to us to break down the tax code into just five things that are most important for you to know.

Erik:

It's simplified.

Randal:

Totally. I think it's kind of elusive for some people and just to kind of get an idea of what's going on with thetax code. First thing we want to point out is that there are a couple things that have been preserved. We have 1031 Exchange, which is preserved.

Erik:

What's a 1031 exchange?

Randal:

When you sell one investment property and you turn that money into a second investment property, you can use an intermediary to avoid your capital gains. Also, the capital gains exemption for yourpersonal property. You own a single-family house, as a single person you have a $250,000 exemption (as a married couple. you have a $500,000 exemption) on capital gains on a home that you have owned or occupied for two of the last five years. Great news for homeowners.

Erik:

A couple things did change a bit.

Randal:

Yes.

Erik:

Relative to homeowners.

Randal:

The mortgage interest deduction reduced from $1M worth of loan value to $750,000 worth of loan value. It used to be that you could write off interest up to a $1M worth of loan's value, not the house's value, but the loan's value and now that is dropped to $750,000 in loan value. That's one change that's coming down 25%. The next one is that you can no longer deduct your home equity line of credit interest. So if you pull out a home equity line of credit to do house repairs or whatever you're going to do with that.

Erik:

That interest is no longer tax deductible. The other thing that changed is the state and local tax deduction which they call SALT, love that name. SALT, they've put a deduction now that you can only claim up to $10K of your state and local taxes that you pay on your income tax.

Randal:

Yeah. It all actually boils down into the fifth one. The fifth one, one that is another change in the positive, is that they've increased the personal deduction from $6,000 to $12,000.

Erik:

So that means those individuals who would have normally itemized $7000, to $10,000, $12,000 no longer need to, because you get that personal deduction up to $12,000.

Randal:

Yeah, so we're gonna attach a little link below for some more information if you want to get some more. Of course, don't rely on your real estate agent for tax information, talk to your accountant if you have questions about that.

Erik:

That's our Focus 5, thank you for watching.

Randal:

If you have any questions, remark below or give us a shout.

Erik:

Yeah, we would like to hear from you on what you think of the tax code.

Randal:

And until next time don't forget to like us on Facebook and subscribe to our YouTube channel.